Montag, 5. Oktober 2009

Court-appointed receiver Ralph Janvey has turned the
spotlight on two law firms. The Miami Herald reported over the weekend
that
Janvey, who has been working with federal agents, is now
pressing for more information directly from Stanford's lawyers.

The receiver has made a request for legal files provided to R
Allen Stanford by Greenberg Traurig and another firm, Hunton &
Williams. The Herald listed this latest move by Janvey as
"one of the most aggressive moves waged by the receiver to search for
assets from Stanford's far-flung banking network".

While Greenberg Traurig is not under criminal investigation,
the firm is facing a legal review of its actions in Antigua. Ross
Gaffney, a former FBI agent who investigated Stanford, was
quoted as saying: "I'm sure one of the things they will look at is
what did Greenberg Traurig know, and when did they know it,
and did they have any liability?"

According to the article, Greenberg Traurig's effort to
assist Stanford in 1998 was but one move in a series which saw the
Florida
law firm rescuing Stanford from crisis and propelling his
business interests. The Herald sought interviews with five lawyers who
represented Stanford while working for the firm. Two of the
five declined to comment, but assured that they were simply providing
legal support and were not aware of any illegal schemes by
Stanford.

The article spoke of a "money pipeline" between Miami and
Antigua which Greenberg lawyers helped Stanford create. It went on to
describe Stanford's creation of a trust office in downtown
Miami which could move millions overseas without reporting anything
to the government.

According to the article, "The unusual arrangement -- created
over the objections of Florida's chief banking lawyer -- let
Stanford open the office without submitting to fraud checks
or money-laundering requirements. Over the next decade, the Miami
center sold millions in Stanford's key investments --
certificates of deposit -- the checks stuffed in pouches and sent in
jets
to Antigua."

The article also chronicled the changes in Antigua's banking
system and Stanford's effort to "keep the pipeline alive". The US
Treasury, the article explained, was considering blacklisting
all of Antigua's offshore institutions because of money laundering
and fraud. In response, Stanford met with then prime
minister, Lester Bird and agreed to pay out of his own pocket for a task
force to rewrite the banking laws.

This task force, the article said, which included Greenberg
lawyer Carlos Loumiet, met in Miami and St John's to examine ways
to avoid a shutdown of the banks. According to the article,
the 1998 legislation gave birth to a new regulatory agency - with
Stanford on board - which would give protection to the
investor from regulators for the next decade.

The Herald pointed to a particular incident which highlighted
the power Stanford gained in Antigua by owning the largest bank.
It spoke of the new regulatory agency requesting all of the
island's secret offshore banking records. The head regulator,
Althea Crick, refused. The agency waited until Crick had left
for the day before seizing the filing cabinets containing the
records and taking them to another building.

According to the story, the February 1999 takeover was
approved by the new regulatory board, including an advisor to Bird,
Errol Cort. The Herald rebutted statements which suggested
that the takeover "was not done under the cover of darkness".
According to the article, records show that Cort was a
director of Stanford Trust Company and one of Stanford's Antigua
lawyers.

International pressure from US and British authorities would
later force Stanford to step down from his position and Antigua
officials agreed to change the laws crafted by the task
force. However, according to the article, "the momentum was in motion
to help Stanford's bank for years to follow."

It noted, "With the new regulatory agency enforcing new
banking rules, most of the 56 offshore banks on the island were
eliminated, swatting away much of his competition." It also
explained that court records show that Stanford's own bank was
fabricating financial reports at the same time he was taking
over the regulatory agency.

With millions of dollars coming into the Antiguan bank,
Stanford switched to Hunton & Williams, after Loumiet joined the
firm in 2001. In 2002, regulator Crick was replaced by Leroy
King, who has been accused of taking more than $200,000 in
bribes.

Loumiet and Hunton & Williams have agreed to turn over
records of legal work for Stanford's US companies to Janvey. But
they are fighting to keep secret the details of Stanford's
businesses in Antigua and other foreign countries.

A spokeswoman for Hunton & Williams, Eleanor Kerlow, was
quoted as saying: "There are legal issues regarding jurisdiction
and client privilege that must be resolved before we proceed
further."

According to the Herald, it is anticipated that Houston Judge
David Godbey will decide whether the firm must meet Janvey's
demands. Kristie Blumenschein, an attorney with the
receiver's firm, has indicated that they are ready to fight for the
records.
According to Blumenschein, Janvey will not only search for
assets, but the actions of the lawyers, dating to the 1990s, will also
be under review.

It is being suggested that Janvey can demand lawyers be
coerced into testifying about what they knew, since any conversations
they had with Stanford about his ongoing crises are not
protected by attorney-client privilege.

Employees at the U.S. brokerage industry's main regulator
must more aggressively exercise their authority, and escalate
suspicions of serious fraud to senior managers or special
investigators, according to the report released today. Finra
said it will create an Office of Fraud Detection and
Market Intelligence to ensure that investigators with expertise in
fraud detection can respond rapidly.

The report shows regulatory lapses linked to Madoff's
record Ponzi scheme weren't confined to the Securities and
Exchange Commission, which has been faulted by its own
internal watchdog for inadequately pursuing tips over 16 years.
In Stanford's case, Finra also received "credible
information" from at least five sources, including the SEC, according
to the internal report.

"As regulators, we owe it to investors -- especially those
harmed by recent scandals -- to develop a better, more
comprehensive, response to fraud," Finra Chief Executive
Officer Richard Ketchum said in a statement. "I am committed to
taking the lessons from the report's findings to make
Finra even stronger."

SEC Chairman Mary Schapiro led Finra and its predecessor
NASD from 2006 until taking over the SEC in January this year.
During that time, the brokerage regulator conducted some
examinations of Madoff's firm and fined Stanford Group Co. The
SEC oversees Finra and approves its rules.

Jurisdictional Limits

In a series of reports this year, SEC Inspector General H.
David Kotz has faulted his agency's oversight of Madoff and
examined its attempts to investigate Stanford. In the
Stanford case, he concluded the SEC was hampered by jurisdictional
limits and Stanford's refusal to cooperate.

Kotz found that the SEC never fully investigated at least
six tips on Madoff since 1992 while he was building a $65 billion
Ponzi scheme. While there is no evidence that Finra
received similar whistleblower complaints, its examiners did uncover
several facts worthy of inquiry that, "with the benefit of
hindsight, should have been pursued," the Finra report said.

In 2005, the SEC sent a five-page letter to Finra about
Stanford. The letter said his certificates of deposit "appear too
good to be true" and that his firm had aggressive sales
tactics commonly associated with fraudulent schemes.

Misinterpretation

According to the report, Finra's lead examiner "thought
the letter signaled that the SEC had taken over the CD case" when it
was actually meant to refer the investigation to Finra. In
light of the misinterpretation, the examiner "did not do all he
could have done on the CD issue."

In 2006, Finra examiners noticed Madoff was making
payments to Cohmad Securities Corp., according to the report. Had
examiners sought more documents, they might have realized
that the fees were for steering clients to Madoff's investment
advisory business. Such a discovery "may not have
uncovered the Ponzi scheme, but it would have undermined the Madoff
firm's
longstanding representations" that it didn't have customer
accounts, the report said.

In 2007, Finra staff uncovered commissions from a London
affiliate that criminal investigators have linked to money laundering,
according to the report. If examiners had fully
scrutinized the transactions, they may have fueled suspicions and
prompted a
broader investigation, it said.

Anonymous Letter

In 2003, Finra received an anonymous letter calling
Stanford's business a "massive Ponzi scheme that will destroy the life
savings of many." The letter was not seen by the
organization's enforcement staff until six years later after an analyst
determined Stanford's CDs were not securities and
therefore outside of Finra's jurisdiction, the report said. The analyst
referred the letter to the SEC.

"By more aggressively using its authority, Finra could
have obtained evidence of wrongdoing much earlier than it did," the
report said.

If examiners had fully pursued information that Stanford's
customers were selling securities to purchase CDs based on his
allegedly false advertising, they might have found
sufficient evidence of fraud, the report said.

On at least two occasions, Finra handled complaints from
former Stanford employees who claimed they had been fired after
refusing to sell CDs without conducting due diligence. One
said Stanford was soliciting unsophisticated investors in Latin
America and that the value of his bank's assets were "well
below" his obligations to clients, indicating he was running a
Ponzi scheme. Finra didn't follow up on the allegations,
the report said.

150-Year Sentence

Madoff, 71, is serving a 150-year prison sentence after
pleading guilty to a fraud that federal investigators said dated to
at least the 1980s. Cohmad, which was sued by the SEC in
June, has denied wrongdoing.

Stanford, 59, faces 21 fraud and conspiracy counts linked
to what the SEC has called a "massive" scheme to defraud investors
through the sale of bogus CDs by Antigua-based Stanford
International Bank. He denies wrongdoing and remains in a Texas jail
awaiting trial.

The report was prepared by a special panel formed to
review Finra's examination program, particularly the Madoff Ponzi scheme
and Stanford's alleged fraud. It was led by Charles
Bowsher, U.S. comptroller general from 1981 to 1996. Other members
included Harvey Goldschmid, a former SEC commissioner;
Joel Seligman, president of the University of Rochester; and Ellyn
Brown, Maryland's securities commissioner from 1987 to
1992.

Finra, funded by Wall Street firms and overseen by the
SEC, writes rules for and polices almost 4,800 brokerages. Its board
includes representatives of the financial industry along
with former regulators and academics.